2016 (11) TMI 344 - AT - Central Excise

Valuation - motor vehicles - Whether inclusion of certain expenses by the dealer is included in assessable value - These expenses relate to Pre-Delivery Inspection (PDI), free services provided to customers after sales, training providing to customers, labour involved on replacement of parts, advertisement of vehicles, storage at the dealer s end, repair of vehicles and outward handling of vehicles. - Held that - the vehicle manufacturers, who are appellant/assessee in 4 appeals before us, are selling their vehicle on a declared price and are not getting any additional monetary consideration from the dealers over and above what is mentioned in the sales invoice - Decided in favor of the assessee.

Summary

Issues involved:
Inclusion of dealer expenses in assessable value for Central Excise duty

Analysis:
1. The appeals involved a dispute regarding the inclusion of certain expenses incurred by vehicle dealers in the assessable value for Central Excise duty payable by the appellant/assessee. The expenses in question included Pre-Delivery Inspection (PDI), free after-sales services, training, labor costs, advertisement, storage, repair, and outward handling of vehicles.

2. The appellant/assessee argued that they did not receive any additional amount from the dealers beyond the sales consideration, and the amended provisions of the Central Excise Act were not significantly different. They cited legal precedents where similar expenses were not included in the assessable value.

3. The Department contended that certain expenses, such as PDI charges and after-sales service charges, should be included in the assessable value. They also raised concerns about the quantum of penalty under Section 11AC in the impugned order.

4. The main issue revolved around whether the expenses incurred by dealers should be added to the assessable value of vehicles. The Revenue argued that these expenses enhanced the marketability of the product, but the quantification of these additions was deemed faulty and without a legal basis.

5. Previous decisions by the Tribunal and higher courts were referenced, where it was held that expenses like PDI charges and after-sales service charges should not be included in the assessable value unless they were charged by the assessee to the buyer. The legal validity of circulars and the interpretation of relevant sections of the Central Excise Act were crucial in determining the inclusion of expenses.

6. The Tribunal further examined the inclusion of advertisement expenses incurred by dealers. It was held that dealer advertisements could benefit them but did not necessarily add to the assessable value. Legal precedents were cited to support the exclusion of such expenses from the assessable value.

7. The Tribunal analyzed cases where advertisement expenses by dealers were considered for inclusion in the assessable value. The presence of enforceable rights and obligations in dealer agreements played a significant role in determining whether such expenses should be added to the assessable value.

8. After considering various legal precedents and the facts of the case, the Tribunal found no merit in including the expenses incurred by dealers in the assessable value. The appeals filed by the appellant/assessee were allowed, while the appeal filed by the Revenue was dismissed due to lack of merit.